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Trump's North America Trade Triumph

10-16-2018

ANALYSIS

For those on the left and right who were certain that Donald Trump's presidency meant the end of global free trade...think again.

Though Trump's critics have dismissed the significance of the new Mexico and Canada trade deal, it's hard to deny it's a welcome advance for the economy on the entire continent. The pact will extend for years a (mostly) tariff-free North America trade zone. This was Ronald Reagan's vision nearly four decades ago – and that legacy will now live on for hopefully many years to come.  

Here's just one example of the importance of this agreement.  In the area of energy production, the integration of our economies and the freer flow of energy investment capital across our southern and northern borders means more pipelines, more LNG terminals, more oil refineries and more exploration. North America is now poised to be the new Middle East for energy production for the next 50 years with all the related economic advantages that confers on our region.

One of the most favorable outcomes of the new trade pact is the provision that locks in 10 years of patent protections for new pharmaceutical drugs and vaccines. While some critics are portraying this as a sell-out to the big drug companies, the opposite is true. Patent protections for drugs invented in America REDUCE costs for American consumers by forcing foreign countries to help pay for the research costs (about $1 billion for each new drug brought to market) and stop free riding on our innovation.  

As University of Chicago professor Tomas J. Philipson puts it in a 2018 study on the drug industry: "There is no free lunch. If neither Americans nor foreigners pay for the R&D to develop new drugs, then soon nobody will receive new treatments."

One research team that found that price controls and inadequate patent protections will prevent the development of six new blockbuster drugs each year by 2020 and more than a dozen a year by 2050. No one can benefit from a drug to cure cancer, MS, Alzheimer's, or epilepsy at ANY price if it hasn't been invented.    

The USMCA (United States–Mexico–Canada Agreement) will both save lives by accelerating medical research and reduce drug prices at home by ensuring that foreigners no longer enjoy medical innovation without paying their fair share.  

Despite these virtues, Democrats in Congress are threatening to vote as a bloc to prevent passage of the trade pact. These are the same people who just a few months ago were complaining that Trump's "reckless and dangerous" trade policies were harming the economy and alienating our allies. Now he has a deal that helps the economy and unifies our neighbors - and they are against it.  They have exposed themselves as free trade hypocrites.  

Opponents of the new trade agreement on the left and right have nitpicked about certain hard-to-defend features of the plan, such as foolish wage requirements for Mexican auto workers. But this misses the bigger point. USMCA means that free trade is alive and well across the borders of North America.

Congratulations to Donald Trump and his trade team for delivering an agreement that will promote prosperity across all three nations.   

Stephen Moore is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks. His new book "Trumponomics" will be released later this month.   

 

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